Metro News Release
For immediate release: December 3, 2009
Metro Board briefed on disappointing budget picture
Combination of fare increases, service cuts possible in FY2011
The lingering effects of what has been reported as the worst economic crisis since the Great Depression will mean lower ridership and revenues for Metro in Fiscal Year 2011, Metro’s Committee on Finance, Administration and Oversight was told today. However Board members made it clear that service reductions and fare increases were the last options that they would consider to close a $175.4 million gap in Metro’s FY2011 operating budget.
In a preliminary discussion of Metro’s FY2011 budget challenges and recommendations, Metro Chief Financial Officer Carol Kissal explained that if fares and contributions from Metro’s partner jurisdictions remain constant, Metro would face the gap in its operating budget.
Metro’s preliminary budget proposal requested that the Metro Board consider a combination of fare increases, service reductions, administrative cuts and funding more preventive maintenance from the capital budget to help close the gap.
Service reductions being considered for FY2011 could include:
• Reducing bus and rail service on some holidays and holiday-related days (i.e. the day after Thanksgiving) to be more in line with ridership;
• Eliminating bus service that overlaps local jurisdictional service;
• Eliminating low-ridership bus service;
• Increasing the intervals (headways) between trains and buses;
• Closing some station mezzanines and rail stations during periods of low ridership;
• Modifying late-night rail and bus service; and
• Beginning rail service later in the mornings.
“We are a mobility organization and the very last thing we will consider is raising fares and reducing service,” said Peter Benjamin, Chairman of Metro’s Finance, Administration and Oversight Committee. “We are going to find every cost cut that we can make to minimize service cuts or fare increases.”
Two other options were also presented to the Board to consider for use in closing the budget gap. One option would be for Metro to make deeper cuts in the operating budgets of its departments.
Another option would be for Metro to fund a larger percentage of preventive maintenance through its capital budget.
The nation’s economic difficulties seem to be a major contributor to the 7.9 percent decline in projected revenue for FY2011, compared to the revenue projected in the FY2010 budget. As a result of unemployment and reduced spending by consumers, Metro’s ridership for FY2011 is projected to be a meager 2 percent above FY2009 levels. Thus far, in FY2010, ridership revenue has been 6 percent lower than expected for Metrorail and 10 percent lower than expected for Metrobus. Riders are also taking more short trips, which causes the average Metrorail fare to decrease. Lower rail ridership also has resulted in less revenue from Metro’s parking facilities. However, MetroAccess ridership is expected to grow 15 percent.
“Higher unemployment means fewer people are commuting to and from work, which means fewer people parking in our lots and fewer coming through the faregates and boarding buses,” Kissal said. “Increased joblessness is impacting our bottom line.”
Additionally, from FY2008 to FY2010, policy permitted Metro immediate use of 5 percent of the money it brought in from the purchase of fares. This allowed Metro to have access to revenue from fare media that might never be used, such as revenue from the sale of Metrochecks. Metro staff has recommended reducing this number to 3 percent, which is a return to FY2007 policy. The discontinuance of Metrochecks and the growing use of SmarTrip cards have increased the amount of prepurchased fare used by customers.
Metro’s advertising revenue is also projected to decline significantly in FY2011. The current advertising contract was signed during booming economic times and that contract will expire at a time that the advertising market has declined along with the economy. Metro is also expecting less revenue from pay phones, interest income, and other sources, also largely due to economic conditions.
For FY2011, Metro’s expenses are projected to grow 7.5 percent for several reasons, including the rise in health care costs, the decline in the stock market, the large growth in demand for MetroAccess service and the Red Line collision in June of 2009.
Metro employee health care costs for FY2011 are projected to increase by 8 percent, which is in line with national trends for the costs of health insurance. Metro’s contributions to employee pensions are projected to be $102.6 million, or 24 percent higher, due to the poor performance of the stock market. Metro management took action in 2009 to cut the growth of pension costs by almost one-third by extending the amortization periods for most of its pension plans.
The increasing demand for MetroAccess paratransit service accounts for a projected $27 million increase in the FY2011 operating budget.
The increased cost of liability insurance and projected claims will require an increase to the FY2011 budget. These increases are a result of the June 22nd collision of two Red Line trains near between Takoma and Fort Totten Metrorail stations, and Metro staff has recommended adding $12.7 million to the expense budget.
Metro proposes limiting salaries and wages to an increase of only 1 percent and is proposing no salary increases for its non-union employees in FY2011.
Metro has held steady its costs for fuel and electricity, supplies, and utilities through its innovative energy “swap” program, which locks in lower pricing for diesel fuel and electricity for months at a time. Greater use of repairable parts in maintenance activities has also helped contain costs.
Media contacts for this news release are at 202-962-1051.
For all other inquiries, please call customer service at 202-637-7000.
News release issued at 2:31 pm, December 3, 2009.